Currently under contract on first deal. Looks like it should all work out swimmingly to me. What do you guys think?
2 bedroom, 1 bath, townhouse in Reading, Pa.
Buying for 13,000.
Paying $6500 cash and owner financing remaining $6500 over 2 years at 9% interest ($297 monthly)
Comparable houses in area average 15k-30k
Needs about 6k in repairs to get up to comfortable standard. (Replace part of roof, install new furnace, some electrical work, and light cosmetics. Already have estimates from contractors)
Once purchased, will take out equity loan for 6k and and use for repairs. Already approved from bank to do this. Will pay off at 6% interest over 7 years.
Will rent for $550 once complete.
Taxes: $900yr, Water: $600yr, Property management: 10% (all ready to be in place when house is done)
Won't be making much until it is paid off after 2 years. House is not in the best neighborhood but I am familiar with the area and will be living close by.
Easy answer...bad deal...run, don't walk, to the next deal that actually makes money for you. Here are yoru numbers:
Your cash into deal $6000
Cash Flow (not really)
Rent + $550/month
T/W/I - 200
PM - 50
Mortgage - 279 (24 pmts)
HELOC - 101 (84 pmts)
Negative CF = ($ 80/month)
Where is the "good" part of the deal?
Here is where it really gets bad.
End of first year, you are out:
The original cash in the deal $6000
Negative cash flow for 12 months 960
TOTAL LOSS in 1st year $6960
TOTAL LOSS after 2nd year $7920
TOTAL LOSS after 3rd year $5040 (seller loan paid off)
TOTAL LOSS after 4th year $2160
TOTAL Profit after year 5 $ 720 (Finally....Positive cash flow)
Sorry, I don't see it. What I do see is you could probably make more actual profit investing that $6k in a different deal.